PORTFOLIO MANAGEMENT AND ASSET ALLOCATION LESSONS FROM THE MAHABHARAT

Thenote can move freely across need and time.

- PRIYA SUNDER

Yet people often treat it as non-fungible, and create discrete money buckets, where each bucket caters to a specific goal.

Each such portfolio has its own risk and return strategy and grows at a specific rate to deliver the required corpus to meet the goal. However, this is flawed, compared to a holistic approach to investing. Here is why:

First, based on the customer's age, financial situation and risk appetite, an overall target asset allocation is established. In the siloed approach, each bucket may have a different allocation between equity and debt with varying levels of risk and volatility.

Some individual goal portfolios might be too conservative, while others could be too aggressive. For example, an overall portfolio may need a 50% allocation to equity to meet all longand short-term goals, while a siloed portfolio could result in an 80% allocation to equity in some cases and zero in others, leading to overall allocation that is less or more than the optimal level.